How to Terminate an Employee in the Philippines — the Right Way

Nobody enjoys firing someone. But in the Philippines, how you do it matters as much as why you do it — and getting it wrong can cost you far more than the separation itself.

Philippine labour law is strongly weighted toward employees. Courts and labour arbiters interpret ambiguity in their favour, and the process for termination is spelled out clearly in the Labour Code. Overseas employers who skip steps — even when the underlying reason is solid — regularly find themselves on the losing end of illegal dismissal claims. Backwages, separation pay, damages. Sometimes reinstatement.

This guide walks you through how it actually works.

Two Types of Termination — and Why It Matters Which One You’re Using

Philippine law draws a hard line between two categories of lawful termination: just causes and authorised causes. They sound similar. They’re not.

Just causes are about the employee’s behaviour. Serious misconduct. Wilful disobedience. Gross neglect. Fraud. These are situations where the employee has done something wrong, and you’re terminating them because of it. No separation pay is required — but you have to follow a strict process before you can pull the trigger.

Authorised causes are about your business. Redundancy, retrenchment, closure, or a disease the employee has that can’t be resolved within six months and poses a risk to others. The employee hasn’t done anything wrong — you’re letting them go for legitimate business reasons. The process is different here, and you will owe separation pay.

Know which category you’re in before you do anything else. The mistake many overseas employers make is treating all terminations the same way.

Just Cause Terminations: The Twin-Notice Rule

For just cause terminations, the law requires what’s called the twin-notice rule. Skip either notice, and the termination becomes procedurally defective — even if the reason was completely valid. That costs you PHP 30,000 in nominal damages at minimum, and opens the door to more if the employee decides to push it.

First notice — the show-cause notice. This goes to the employee before any decision is made. It explains specifically what they’ve done or failed to do, tells them termination is being considered, and gives them a chance to respond. The standard is five calendar days to reply. This isn’t a formality — they need a genuine opportunity to explain themselves.

The hearing. Once you have their response (or they’ve chosen not to give one), you hold a hearing or conference. For overseas employers managing remote teams, a video call with a written summary is fine. The point is that the employee has been genuinely heard — not just sent a notice and ignored.

Second notice — the termination notice. Only after the hearing do you issue the final decision. This notice confirms the grounds, states that you’ve considered everything, and gives the effective date. Issuing both notices at once defeats the purpose of the process entirely. Don’t do it.

Authorised Cause Terminations: 30 Days and Separation Pay

If you’re letting someone go for redundancy or retrenchment, the process looks different. You need to give both the employee and the DOLE Regional Office 30 days’ written notice before the termination takes effect. Both. At the same time. Miss the DOLE filing and you risk the whole termination being invalidated.

Separation pay is mandatory here, and the amount depends on the reason:

• Redundancy: one month’s pay per year of service
• Retrenchment: half a month’s pay per year of service
• Closure not due to losses: one month’s pay per year of service
• Closure due to serious financial losses: no separation pay, but you’ll need to document the losses clearly

Any fraction of a year that’s six months or more counts as a full year. “One month’s pay” means last drawn monthly salary including regular allowances.

What Happens When You Get It Wrong

Illegal dismissal in the Philippines isn’t just a slap on the wrist. If a termination lacks a valid cause, the employee is entitled to full reinstatement with no loss of seniority, plus backwages from the date you let them go until the date they’re reinstated. If reinstatement isn’t feasible, they get separation pay in lieu — on top of the backwages.

Even if your cause was valid but your process was sloppy, you’re still looking at nominal damages. Philippine labour arbiters take procedure seriously. The number of overseas employers who’ve lost cases purely because they didn’t follow the twin-notice rule — despite having solid grounds — is significant.

A Practical Sequence to Follow

Talk to your EOR or a Philippine labour lawyer before you do anything. This is not the place to improvise. If your team is employed through an Employer of Record, your provider should be guiding the process from step one. If you employ directly, get legal counsel engaged before any notices go out.

Build your paper trail. For just cause terminations, documentation is your foundation. Written warnings, performance improvement plans, incident reports, email threads showing the pattern — all of it. The strength of your documentation determines the strength of your position if it’s ever challenged.

Follow the notices precisely, in sequence. First notice, then hearing, then termination notice. Keep copies of everything. Date them correctly. Don’t rush it.

Calculate final pay carefully. On the last day, the employee is owed: unpaid salary, pro-rated 13th month pay, cash conversion of any unused leave under your policy, and any legally required separation pay. DOLE guidelines say final pay should be released within 30 days. Don’t let it drag.

Issue the Certificate of Employment. Employees are legally entitled to a COE on request, regardless of how or why they left. Refusing to provide one is a separate violation on top of everything else.

The Mistakes That Keep Showing Up

The “effective immediately” email. Sending a message that says someone’s role is being ended effective today — with no prior process — is illegal dismissal, full stop. The medium doesn’t matter. The lack of process does.

Probationary employees and missing standards. You can terminate a probationary employee for failing to meet performance standards — but only if you told them what those standards were at the start. If that conversation never happened in writing, the law may treat them as a regular employee.

The pressured resignation. If an employee resigns after being told they’d otherwise be fired, or under circumstances that suggest the resignation wasn’t truly voluntary, a labour arbiter can treat it as constructive dismissal. The remedies are the same as illegal dismissal.

Skipping the DOLE notice for authorised causes. Non-negotiable. File it.

Why EOR Makes This Significantly Easier

Managing a Philippine termination from overseas — drafting compliant notices, coordinating DOLE filings, calculating final pay correctly, handling the hearing process — is genuinely hard to do well without local expertise. One missed step can turn a legitimate decision into a costly dispute.

When your team is employed through The Company, we carry the employment relationship and all of the compliance obligations that come with it. You make the business decision. We make sure the execution is clean. If you’re considering a separation and want to make sure it’s handled correctly, reach out to us.